the people almost entirely without a circulating medium. The paper of these two banks had been at a discount for specie ever since the United States refused to receive it for the public lands, and to make the banks depositories of the public moneys."
"That which contributed the last spark to the explosion of the State Bank was the course of some of the State directors, who were contractors to finish the northern cross railroad, and who were to be paid in canal bonds, which at the time were unsalable. These interested parties, joining with others in the directory, established it as a principle that the bank could not issue an excess of its paper whilst in a state of suspension. This they did to get loans from the bank to carry on their work on the road; and having obtained money themselves upon this principle, they were obliged to vote loans to all others. But experience soon showed that the principle was false, for no sooner was more paper put into circulation than could be sustained by the business of the country, than the bank exploded. It may be added to this that the State Bank, to obtain favor from the Legislature, was compelled to make loans to the State, and to advance its bills for auditor's warrants for a large amount to defray the ordinary expenses of government; the revenues being again insufficient, and the Legislature afraid to increase the taxes."[1]
In the spring of 1842, the Bank of the State allowed its notes to fall to 50 cents on $1. As half the revenue of 1841 had been collected, the State officers thought that fairness required that the remainder of it should be allowed to be paid in the same currency. Hence this paper became the only medium of payment to public creditors. "Judges and other officers of government were obliged to take it at par for their salaries, and even the interest on the school fund could only be paid in this worthless currency." The State also had to give its six per cent. auditor's warrants for these notes, which it could only use again at the rate mentioned. "The Constitution expressly prohibited the Legislature from reducing the salaries of the Judges. The object of this prohibition was to preserve the independence of the judiciary. The bank, however, found no difficulty in reducing their salaries more than one-half, and this too when its own officers were receiving liberal salaries in gold and silver." The taxpayers now hastened to pay their taxes for 1842 one year in advance, before the Legislature could take any action to prevent taxes from being paid in this depreciated currency. According to the existing system also this revenue must have been paid into the Bank of the State. The Governor, Auditor, and Treasurer, acting under power which had been given by law, published a proclamation, August 15th, forbidding the payment of school, college. and seminary debts, and public revenue, in notes of the Bank of the State. This left such dues payable in auditor's warrants, of which there were enough outstanding. September 12th, they published another proclamation, warning collectors not to receive
- ↑ Ford, 223.
